This is an update of a post I wrote in 2010. At the time, I'd been thinking of moving to Japan to teach English. I didn't really want to teach English, I wanted to move to Japan and thought teaching English would be the best way to go about it. Then, I went to a talk at my Japanese school about studying in Japan. Just out of interest.
Then it hit me. Why go to Japan to teach English, spending the prime part of my day speaking in English when what I really wanted to do was learn Japanese. At the talk, one of the schools in Tokyo said it was too late to apply for their October term but they were taking enrolments for January. I was working on an IT contract that finished in October and didn't want to have three months of doing nothing. If I was going to do this thing, I wanted to do it in October.
I called them and asked if there was any way it would be possible to still apply for the October term.
They told me I could if I put my application in THAT day. No time to think, I rushed into the city and applied. After all the excitement died down, I realised I had FIVE months to save enough money to support myself in the most expensive city in the world.*
(* Actually I think Sydney and even Melbourne are more expensive).
I had the option of working part-time but didn't want to rely on that, which ended up being a good thing because even though I taught part-time, it was always limited. Everyone wants to learn English in the 6-8pm, Monday - Thursday time slot and I'm only one person.
So, how did I do it?
This is hardcore and not for the weak of heart or if you just want to just put aside some money for a holiday or a nice treat. This is the "OMG I've got 5 months to save all the money I need to live in the World's most expensive city" saving plan.
There are many positive things that motivate people however, the BEST motivator is not one bit positive, feel-good. The best motivator is FEAR.
Think about it - if I asked you to run a marathon and gave you support plus told you that you'd get kudos and a shiny medal and maybe even champagne at the end, you might do it. If I released a furious tiger, with its snarly mouth and hunger tiger-breath on your heels, you'd run a hell of a lot faster. You wouldn't be stopping for fancy gels and Gatorade. You wouldn't be worried about the twinge in your hammy. You'd run like the blazes, then run some more.
This is chased by a tiger budgeting. It's not easy, it's not nice but it is possible. I know, I did it. I've done it more than once.
1. Make a budget
Okay, most people will tell you the wimpy candy-assed way to make a budget. That is, you work out all your expenses and living costs then you work out how much you can save. Wrong, so very wrong.
What you'll do is think, ummm maybe I spend around $50 a week on food... make that $70... maybe $80... until your budget is padded like a skinny dude in a Santa suit.
You have stuff like car rego which is once a year. How do you fit that into a weekly or monthly budget? You can't. Sure you could divide by 12 and put that side each month, but you won't. You so won't. You know it. You'll spend it on fruity cocktails instead and have no money for the car rego when it's due.
Instead, use a little thing I call the Kathryn Method.
Work out how much you want to save (=shitloads). then make your living expenses fit around it. In Australia, the dole is around $250. People live on that. You can live on that.
At the moment, my living expenses (except rent) are $200 a week. When that's gone, it's gone. I figure if I lost my job and had to go on the dole, I'd have to live on this (probably less) so I can live on it now. Add on about $50 a week for the cost of working - transport, food, having to put in for someone's leaving/wedding/bullshit present (you can avoid that by going to the loo every time the envelope comes around).
GET YOUR PAY DEPOSITED IN YOUR SAVINGS ACCOUNT, NOT YOUR SPENDING ACCOUNT, THEN TRANSFER YOUR LIVING MONEY. NOT THE OTHER WAY AROUND.
2. Get a Well Paying Job
Cap'n Obvious says the more you earn, the more you can save. This is a toughie because not everyone can just quit their job and get one that pays better. Also, if you are planning to save money in the real short term, even a week or so out of work can screw your plans up big time.
But, if you are talking medium term (around 12 months or so) plans and you are stuck in a low paying job, it's seriously worth it.
For example, when I lived at a cafe, some of the staff would bitch about their low pay and how they wanted to do other things. I'd suggest working in a call centre. My son works in a call centre and earns decent money for someone who is uneducated/barely literate/makes awful puns. They'd like "oh I'd hate working in an office... I wouldn't like ...blah...blah...blah..."
If you are serious about saving, suck it up. Why would you earn less than $15 in a cafe when you could be earning >$20 an hour + bonuses?**
The only reason you should be working in a low paying job is IF that job is your dream. If you have always wanted to be a teacher or a hairdresser or a waiter and you wouldn't be happy doing anything else, then you aren't going to be saving to do something else now, are you?
If you are just holding on because it's comfortable and safe, think again.
** Apparently, outside Australia, you wouldn't earn these rates.
2a. Temp/Casual/Contract work: will always pay more than being on a salary
.(In Australia, anyway)
If you want job security and a regular pay cheque for the next however many years, if you need to pay off your mortgage, if you have a family, then a salary is for you. If you want to save money fast, then you don't need all those fancy perks like sick leave and holidays and promotions and training. You've here for a good time, not a long time.
If you work in a job/industry where you are expected to work beyond a standard 8 hour day then you really, really should consider (even more) going casual. I will demonstrate with simple maths.
$10 an hour = $20,000 pa (roughly: hourly rate*2000 = yearly rate working 40 hours a week).
Now, say you routinely work a 44 hour week, staying back late or working through your lunch hour.
44 * $10 = $440 (in 10 weeks, you've earned an extra week's salary)
$400 (your equivalent hourly rate has gone down from $10 to $9.50)
Then, add to this, you will get more per hour because you are casual. Normally, around 25% more. So now you are earning:
44 * $12.50 = $550 a week = awesome sauce.
And people ask me why I don't get a permanent job, like it's some kind of better deal!
3. Minimise your tax
Some people like to think of paying extra tax as being forced savings. Fine, except do you know what rate of interest the ATO pays on those savings? A whopping great 0%, that's what. I get more interest than that when I loan money to my family! Don't pay tax you don't have to.
I don't use a tax accountant or anything fancy - because I'm too cheap to pay one and also, I don't want people sticking their nose in my money business. I just read stuff on the ATO web site and ask questions. It's fun, trust me. Okay, it's not fun but it can save you cash and cash is fun.
For more details about tax, see my entry on how to get some easy money
... but really, get ATO or professional advice, don't just rely on me.
Note: this only applies to Australians. Check with the tax people in your country to see what the situation will be.
4. Second job?
Personally I don't hold with this. Second jobs tend not to pay well - and get taxed to buggery, so you don't end up with much in your pay packet. If you are working in well paying, casual first job, you are better off putting your energy into working more hours at that (and staying healthy and alert to avoid time off).
If you do want a second job (because your first job doesn't pay that well or whatever), go for:
a. Something that's not highly taxed - eg. you get a low salary but a generous (non-taxed) travel or other allowance. A job like delivering pizzas, for example.
b. You get something for free that you'd otherwise be paying for. If you normally drop a couple of hundred bucks a weekend at your local bar, see if you can get a bar job there. You still get to hang out and you get paid for it.
c. A job that gives you freebies that you'd otherwise be paying for -- a free place to live, free food or other goodies. I worked as a mystery shopper for years off and on. The pay isn't great but you get loads of freebies.
d. A job that will give you skills you can use while you travel -- eg. if you want to teach English overseas, get a second job working with kids so you have that on your resume, you want
I would never suggest doing cash in hand work to avoid tax because that is illegal and wrong.
There, that's not so hard. But, wait, read part 2, the bit where you cut your expenses to the bones.
After saving to move to Japan, I've used this plan for other overseas trips. It works. You just need to sort out your priorities.